CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENT

Transcription

1 May 2015

2 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENT Some of the statements contained in the following material are forward-looking statements and not statement of facts. Such statements are based on the current beliefs of management, as well as assumptions based on management information currently available. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from expected results. Readers must rely on their own evaluation of these uncertainties. Note: all dollar amounts in US dollars unless otherwise indicated 2

3 BUILDING A LEADING GLOBAL COPPER-FOCUSED COMPANY Delivering new production capacity Maintaining a healthy balance sheet Enhancing our growth pipeline Operating safe and efficient mines 3

4 DELIVERING NEW PRODUCTION CAPACITY Smelter Ramping-up Ahead of Expectations Already operating at ~65% of capacity Releasing copper concentrate inventory Sulphuric acid by-product reducing 3 rd party purchases Benefiting from: Extensive planning & built-in contingencies Focus on operator training A valuable addition to our asset base in Zambia 4

5 SMELTER RAMPING-UP AHEAD OF EXPECTATIONS 5

6 SMELTER RAMPING-UP AHEAD OF EXPECTATIONS 6

7 SMELTER RAMPING-UP AHEAD OF EXPECTATIONS 7

8 DELIVERING NEW PRODUCTION CAPACITY Sentinel Mine Making Steady Progress Pace of ramp-up improving with start of drier weather Train 1 achieving periods of above design throughput Train 2 being commissioned All required power on track to be connected by August 2015 Commercial production expected in Q

9 SENTINEL MINE MAKING STEADY PROGRESS 9

10 SENTINEL MINE MAKING STEADY PROGRESS 10

11 SENTINEL MINE MAKING STEADY PROGRESS 11

12 DELIVERING NEW PRODUCTION CAPACITY Cobre Panama Progressing Strongly & Under Good Control Engineering of all major areas ahead of site requirements Port Earthworks complete Concrete pouring for powerstation Material offloading facility complete Structural steel erection underway Tailings dam Constructing both the eastern and northern embankments Process plant Earthworks complete at the milling and stockpile areas Well-advanced on the flotation area earthworks Well-advanced in concrete pouring Structural steel erection starting shortly Commencing installation of 3 mills 12

13 COBRE PANAMA PROGRESSING STRONGLY & UNDER GOOD CONTROL 13

14 COBRE PANAMA PROGRESSING STRONGLY & UNDER GOOD CONTROL 14

15 COBRE PANAMA PROGRESSING STRONGLY & UNDER GOOD CONTROL 15

16 DELIVERING NEW PRODUCTION CAPACITY Enterprise Development Continuing Concrete works essentially complete SAG and ball mills installed Structural and tank works underway Production pre-strip ready by Q Flexible 4 mtpa processing plant can be used for copper production at Sentinel Market conditions will determine timing of operations 16

17 MAINTAINING A HEALTHY BALANCE SHEET Cash Flow Capability Increases With Ramp-up of Smelter and Sentinel As at March 31, 2015 Cash = $302M; Available facilities = $744M Financial covenants revised to reflect adverse impact of recent decline in metal prices and higher royalty in Zambia. Compliant with Net Debt to EBITDA covenant under the Financing Agreements and expect to remain so in the future Reduced capital expenditure program From $2.9B in 2014 to $1.4B in 2015 Reflects completion of Sentinel, the smelter and other smaller projects Workplan unchanged at Cobre Panama; $600M capex estimate for 2015; project s progress intact Reduced dividend; launched dividend reinvestment and share purchase plan Stepped-up focus on cost and cash containment 17

18 OPERATING SAFE & EFFICIENT MINES Q1 Performance In-line with Guidance Kansanshi s production intentionally limited in Q1 Going forward, smelter operations expected to: Further release concentrate inventory Allow greater utilization of CCD capacity Remove smelter capacity constraints Ravensthorpe s high-pressure acid leach circuit operating well All mines cash positive and profitable Unit production cost benefiting from cost reduction initiatives and lower fuel costs 18

19 ENHANCING OUR GROWTH PIPELINE Taca Taca project acquired in August 2014 Located in the Puna region of Salta Province, Argentina Detailed review of geology, exploration and development options now underway 19

20 TACA TACA PROJECT 20

21 ZAMBIAN DEVELOPMENTS Zambian royalty regime effective January 1, 2015 Corporate tax 0% Royalty 20% Decreased EBITDA at Zambian operations Expected to be abolished July 1, 2015 Proposed tax regime Corporate tax 30% Royalty 9% Variable tax up to 15% Expected to take effect July 1, 2015 VAT refunds outstanding $242M refunds outstanding at March 31, 2015 Classified as non-current 21

22 STRONG LONG-TERM FUNDAMENTALS FOR COPPER INTACT 22

23 WHAT HAS CHANGED? Reuters Poll January April 2015 Market Surplus 221 kt 105 kt Consensus surplus for this year shrinks to 105kt minimal in context of 23Mt market Dollar appreciation slowing, taking some pressure off copper prices 23

24 WHAT HAS CHANGED? Chinese economy continues to decelerate but officials indicate they have the means to stimulate growth and intend to use them Antaike (state-owned market research company) forecast of copper consumption growth revised down to 5.7% from 6.3% - expect programs will stimulate growth in H2 Wood Mackenzie forecast 2015 Chinese copper consumption growth of 4.3% China Economic Policy News 30 Mar - Eased lending and tax policies on real estate. 19 Apr - Reserve Requirement Ratio for banks reduced 1% to 18.5%. 24 Apr - To boost activity, China will accelerate the construction of big projects, more of which will be announced soon, said Luo Guaosan, deputy head of the investment office at the NDRC. 24

25 REBOUND IN COPPER PRICE HAS TAKEN SOME PRESSURE OFF THE UPPER END OF COST CURVE $2.80/lb $2.50/lb ~200kt Note: C1 excludes royalties 25

26 MARKET BALANCE: A RACE BETWEEN EASING DEMAND GROWTH AND EASING SUPPLY GROWTH THE DOWNSIDE Chinese slowdown deeper than forecast Rate of decline of home prices slowing but property market glut continues to be an overhang Further decline in Chinese copper financing demand Eurozone turnaround stalls Grexit THE UPSIDE Disruptions to supply slightly ahead of forecast pace WoodMac assume 5% for the year and by early April we were at 1.9%. 6% for the year would eliminate their expectation of a modest surplus Labour contracts expire at Antamina (400 kt), Grasberg (470 kt), Toquepala (130 kt), Cuajone (170 kt) China s State Reserve Bureau resumes inventory build 26

27 NO REASON FOR THIS CYCLICAL DIP TO BEHAVE SIGNIFICANTLY DIFFERENTLY FROM PREVIOUS ONES 90th percentile C1 ($2.00/lb) should provide floor on a quarterly basis Cannot rule out repeat of January dip but would be short-lived Will take some time for the market to be convinced the global economy has positive momentum; significant pessimism still built into price 27

28 NEAR-TERM PRICE AT LOWER END OF RANGE DUE TO DEMAND HEADWINDS; BULLISH LONG-TERM VIEW REMAINS INTACT $4.00/lb Price Range Consensus $2.80/lb $2.89/lb $3.50/lb Price Range Analyst LT Consensus Price ($3.00/lb) In 2016, markets could look through current weakness to impending deficits in $2.80 /lb Price floor on an annual basis (90 th percentile Total Cash Cost + Susex) $2.00 /lb Updated WoodMac database 90 th percentile of C1 curve Price floor on a quarterly basis (90 th percentile of C1) 28

29 GROWTH SUPPORTED BY HIGH-QUALITY EFFICIENT OPERATIONS 29

30 FULL YEAR GUIDANCE PRODUCTION RANGES Copper 410, ,000 tonnes Nickel 32,000-40,000 tonnes Gold 218, ,000 ounces Zinc 40,000-45,000 tonnes Platinum 25,000-35,000 ounces Palladium 26,000 and 29,000 ounces In addition, total physical production at Sentinel is expected to be between 120,000 and 150,000 tonnes of copper. CASH COST OF PRODUCTION RANGES Copper $1.30 and $1.55 per pound, inclusive of postcommercial production at Sentinel Nickel $4.80 and $5.30 per pound CAPITAL EXPENDITURES* $1.4 billion including $600 million for the Cobre Panama project * Excludes capitalization of any precommercial production costs and capitalized interest 30

31 BUILDING A LEADING GLOBAL COPPER-FOCUSED COMPANY Top 10 copper producer with significant nickel and gold production Operations and projects in 9 countries High-quality, efficient operations Healthy balance sheet Industry-leading growth Unique core strength of in-house project development Strong track record of project development and shareholder returns 31

32 May 2015